Britain was home to international commodity markets in London and Liverpool in the nineteenth and first part of the twentieth centuries. There was a rising volume of international trade as Britain became the first industrial nation, a major importer of these commodities for its own needs, an entrepȏt, and a centre for organising distribution elsewhere. The London and Liverpool markets facilitated distribution through time with forward dealings. Futures contracts went a step further: actual delivery was not contemplated, and trades were settled by paying price differences. The markets and the trade associations whose members worked in them engaged in private law-making - the way that the markets were constituted and governed; the controls over those using them; the system of rules for transactions on them and how these were cleared and settled; the standard form contracts used for dealings; and the arbitration procedures for dispute settlement. State law intervened in only the most egregious cases of market abuse attracting public condemnation and threatening confidence. Until the twentieth century, lawyers were not regularly engaged in formulating the rules and contracts of the London and Liverpool commodity markets or in advising on how disputes were to be settled or arbitrated.

To satisfy an industrialising and industrialised Britain, huge quantities of ‘soft’ commodities - grain, cotton, coffee, cocoa, sugar and palm oil – were grown, harvested and transported from North America, the steppes of Russia, Asia, Africa and the southern hemisphere for sale on the commodity markets of London and Liverpool. Sales of commodities in the first part of the nineteenth century were by dealings on physical markets and by auction. Trade associations like the London Corn Trade Association formed from the mid-nineteenth century had as a major aim the formulation of standard form contracts to govern the international sale of these commodities. Sale in this way need not be on physical markets or by auction, but could be at a distance. These standard form contracts modified the default rules of sales law. They are the precursors of contracts used world-wide today. Although governed by English law, they were adopted internationally. Traders in other countries had an input into their formulation. In drawing them up trade association members took the lead, with lawyers ‘on tap, not on top’. Disputes were settled by arbitration provided in the contract, and relatively few reached the courts. Untoward court decisions were remedied by redrafting the contracts.

Sale was central to the trade in manufactured goods but hire and hire purchase were also used for the marketing of some goods such as railway wagons, motor vehicles and lorries. With sale the common-law rules, later codified in the Sale of Goods Act 1893, might be altered in the written contract if they failed to accord with commercial need. In practice the default rules and the terms of any written contract worked in the context of the relationship between the manufacturer and purchaser whether, for instance, it was long term and whether trust remained or had evaporated. These written contracts were vital if the contract contained detailed specifications as to how an item was to be made. What happened when things went wrong might be more informal, without resort to lawyers or law. Hire and hire purchase meant customers obtained manufactured goods on credit; on the other, suppliers had some protection through a form of quasi-security if customers defaulted in their payments, or the goods were wrongly disposed of. Manufactured goods could be distributed through commercial intermediaries who were allocated geographical areas to market them and bound to do that at specific prices and in specific ways.

Banks offered two essential sources of finance to trade and commerce. First, the merchant banks financed trade through the bill of exchange, which banks would discount for exporters so they received payment on shipping the goods. From the middle of the nineteenth century the bill of exchange might be drawn under a letter of credit issued by the importer’s bank and payable on presentation of the shipping documents, notable the bill of lading which gave title to the goods. Second, banks provided working capital to industry – not long-term finance - enabling it to pay wages and the cost of raw materials in anticipation of the sale of finished products in home and export markets. This was done by means of an overdraft on the customer’s account (who could draw up to that amount) or through a short-term loan. Typically, both were repayable on demand. They might be unsecured, or supported by a personal guarantee, but in some cases the customers had to provide collateral. Underpinning the banks’ performance in both areas were sophisticated institutional arrangements such as the bankers’ clearing house and the money markets. All these arrangements operated within a framework of generally supportive law.

No country has ever delivered primary and secondary education to the majority of its children without financing it mainly through taxes. In the eighteenth century and part of the nineteenth, the leading countries passed up chances to capture the gains from public schooling of the masses. In Britain and the Netherlands, the payoffs from basic schooling already promised high rates of return, privately and socially, partly by interacting with the rise of commerce. Yet these two leaders delayed for at least a century and a half, partly because of church-school issues and more fundamentally because those with political voice resisted paying taxes to educate the children of others.

Once the political will was mustered to launch universal primary education, adults’ years of school not only grew, but became progressively more equal. The data on years of school worldwide since 1870 show “convergence, big time” in schooling attainment in all countries. This growth and leveling of schooling was, again, dominated by the rise of tax-based public schools. Since before 1914 the Americans were leaders in the quantity of schooling, as measured by years of enrollment and of adults’ accumulated education. Yet as best one can tell from indirect and circumstantial evidence, the United States never led the world in the quality of primary and secondary education.

Starting from estimates of fiscal distribution within each of 53 countries, we can begin mapping a history of how redistribution has evolved historically, and to project some influences on its trends in the next few decades. There has been a global shift toward progressive redistribution over the last hundred years in all prosperous countries. The retreats toward regressive redistribution have been rare and have been reversed. As a corollary, the disturbing rise in income inequality since the 1970s owes nothing to any retreat from progressive government redistribution. Adding the effects of rising subsidies for public education on the later inequality of adult earning power strongly suggests that a fuller, longer-run measure of fiscal incidence would reveal a history of still greater shift toward progressive redistribution, most notably in Japan, Korea, and Taiwan. See Appendix B for detailed sources and notes.

This chapter first identifies (1) how an older population threatens public pensions, (2) some popular counter-arguments that discount pension fears, and (3) the budgetary logic that pension programs must respect. It then provides a twenty-first century global geography of which countries have been courting pension trouble and which have been insuring themselves against it. There follow predictions of which countries will have, and which will not have, budgetary leeway to improve the generosity of public pensions by 2050, without raising tax burdens and without forcing cuts elsewhere in the government budgets. Many countries has no such leeway, given their likely economic growth and their speed of population aging. Finally, to these results about fiscal sustainability is added a listing of some countries that are most guilty of short-changing investment in the young in favor of transfers to the current generation of elderly. Appendix C adds budgetary algebra and each country’s forecasted leeway to 2050.

Other regions are indeed following paths that diverge from the route taken by the industrialized leaders over the last two centuries. In terms of the overall effort to spending tax money on social programs, both for social insurance and for public education, while the later-developing regions have spent lower shares of GDP than do the leading rich countries today, they pay higher tax shares for social spending than did the leaders did at the same levels of real income in the past. Fifty years from now, social spending will well take more than twenty percent of GDP in Japan and many countries of Eastern Europe, and even North America. Yet elsewhere many countries, some with low social spending and some with high, appear to be making wrong choices within their social budgets. This criticism applies especially to India, Turkey, Greece, Latin America, and other nations within the global South. These countries generally have lower PISA scores, lower GDP per person, and higher inequality to show for it.